Advances in Economics, Business and Management Research (AEBMR), volume 46 1st Economics and Business International Conference 2017 (EBIC 2017)

Economic Social Factors And The Effect of Criminality In North Sumatera

Raina Linda Sari Wahyu Sugeng Imam Soeparno Department of Economic Development Department of Economic Development Universitas Sumatera Utara Universitas Sumatera Utara , Medan, Indonesia [email protected] [email protected]

Inggrita Gusti Sari Nasution Department of Economic Development Universitas Sumatera Utara Medan, Indonesia [email protected]

Abstract–Economic development is inseparated various problems such as economic problems, social from the increasing needs of society in every conflict, and legal awareness. aspects such as consumption and other needs. This One crime occurred within 1 minute 32 seconds. condition triggered by various problems such as Meanwhile, counted as many as 140 people out of economic problems, social conflict, and legal 100,000 people at risk of crime [1]. The increasing awareness. Therefore, this study conducted for of criminal acts is based on reported crimes, but the analyzing social economic factors such as the criminal acts will be greater if including with the not percentage of people who did not finish reported crimes. elementary school, Gini ratio, income and The North Sumatera is one of the provinces in unemployment to criminal acts in North Indonesia with the high criminal acts, where Sumatera. The technique of data processing used according to data from BPS that North Sumatera in panel data regression model with The Hausman 2015 was the third position with the criminal acts test to choose the best model within FEM or REM. 35,248 a year. The Metro Jaya Region (Jabodetabek The research area is all regencies/cities in North and surrounding areas) as the top ranking which Sumatera. As the result of the study is the occurred 44,461 criminal acts and East Java was in percentage of people who did not finish the second place with 35,437. elementary school has a positive and insignificant In North Sumatera, the criminal acts are impact to the criminal acts. This variable has the dominated by the theft of motorbike with 5,543 cases smallest coefficient value compared to the other in 2015. Meanwhile, the second case is narcotics with independent variables. Gini ratio has a positive 4,249 cases in 2015. and significant impact to the criminal acts. This The criminal acts of Medan in 2017 occupies variable has the highest coefficient value the rank 16th from 26 cities in Southeast Asia with compared to the other independent variables. the total value of 46.77. Meanwhile, from four cities Income has a negative and significant impact to in Indonesia, Medan is in the second position after the criminal acts. Unemployment Rate has a Jakarta 52.96, Yogyakarta 43.17 and Bali 42.55. positive significant impact to the criminal acts. From 26 cities in Southeast Asia, Kuala Lumpur is the city with the highest criminal acts with a value of Keywords – Criminal; Education; Inequality; 68.64, while the city with the lowest criminal acts is Income; Unemployment Singapore with a value of 16.64 [2]. The high criminal acts in the North Sumatera is I. INTRODUCTION inseparable from socio-economic conditions of the society. The level of education affects to the criminal Economy development is inseparated from the acts [3]. The higher of people education, the higher of increasing needs of society in every aspects including people morality which is the basic of human capital the most important thing such as consumption and to prevent the increase of the criminal acts. other needs. The more urgent needs will encourage Meanwhile, economy deceleration caused the real people to take any actions with no exception even sector getting decrease so the people’s income will be including criminal acts. This condition is triggered by

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to reduce, those things contribute to increasing the There is an interrelationship between the criminal acts. general factors of social, political-economic and cultural building with the number of crimes in the A. Problems environment both in small or large environments, 1. Does the percentage of people who did not finish elementary school affect the number including [6]: of criminal acts in North Sumatera? 1. Economic factors such as the system, price 2. Does Gini Ratio affect the number of changes, income, unemployment, and criminal acts in North Sumatera? economic inequality 3. Does income per capita affect the number of 2. Social factors include education, health, criminal acts in North Sumatera? religion, and poverty. 4. Does the unemployment rates affect the 3. Mental factors such as the strength of number of criminal acts in North Sumatera? religion and influence of reading even from B. Research Purposes media. 1. To know if there is any effect of the 4. Physic factors include climate conditions percentage of people who did not finish and others elementary school on criminal acts in North 5. Individual factors such as age, race, an Sumatera. influence of alcohol or even the impact of 2. To know if there is any effect of Gini Ratio war. on criminal acts in North Sumatera. 3. To know if there is any effect of income per capita on criminal acts in North Sumatera. B. Education 4. To know if there is any effect of Three factors that explain the possibility of unemployment Rates on criminal acts in education affect the criminal participation in crime. North Sumatera. The factors are the effect of income, the availability of time, and the patience or risk aversion [7]. II. THEORY AND HYPOTHESIS Meanwhile, one of the criminal act is influenced by education factor, because education is an important A. Criminality factor for determining the quality of human resource Criminality can be interpreted as a crime [4]. [8]. Education is a resource that provides the greatest Criminality can also be seen from several aspects i.e. advantage over other production factors because to 1. From the juridical aspect, criminality is if find a job requires skill. If the human resources are someone violates the rules or criminal law not educated, then they won’t be able to enter the and he is punished by the court and company to work [9]. sentenced. However, if a person has not Education will give moral influence to the been punished, then the person is not participation of people in criminal activity. Where is considered a criminal. someone who has a higher education will keep his 2. From the social aspect, criminality is if moral not to commit criminal acts that could damage someone fails to adjust or do deviates thing his reputation and good name, while morally, higher consciously/ unconsciously from the norms education will better guarantee someone to be able to prevailing in society so that its actions can work and earn a better income to provide comfort and not be justified by the community. avoid the desire to commit crimes. But this would be 3. From the economy aspect, criminality is if the opposite if someone doesn’t have a high someone/more considered to be detrimental education, where he will look for ways to meet the to others by imposing his economic interests needs of his life that can not be met with income or on the surrounding community so that it is work earned with low level of education, so he will perceived an an obstacle to the happiness of be tempted to commit crimes to fulfil his needs of others. life. Criminality is any actions or acts that harm both economically and psychologically in violation of the C. Inequality of Economic laws prevailing in Indonesia as well as social and initiation of rational criminal model activities religious norms. Can be concluded that criminality is argues that the individual decisions to be criminals or all kind of unlawful acts and disobey social norms so not based on benefit-cost analysis [10]. Explicitly, the that the society opposes it [5]. individual’s decision to commit crime-based on his desire to meet the targeted consumption level. If

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someone can’t reach the level of consumption religious norms [5]. There is an interrelationship through legal way, there is a possibility to do so between the social factors and economic factors with through criminal activity. The relative income of the the number of crimes in the environment both in rich when compared to the poor will make the small or large environments [6]. distribution of income unequal and will increase the The level of criminality can be influenced by crime rate. economic variables, demographics, or other variables Inequality shown through Gini ratio will affect either partially or simultaneously [3]. The crime rate crime in many ways. The first way occurs as a result is strongly influenced by Population Density, GDP of social jealousy between the poor and the rich so Per Capita, Open Unemployment Rate, School that the poor will try to get what the rich have in Dropout Rate of Elementary (SD/MI) and Junior some of forbidden ways that lead to the emergence of High (SMP/Mts), Percentage of Population with criminal acts. Alternatively, there may be a difference divorce status and Poor People, Gini Ratio [15]. in expected income earned by the excessive gap Education plays an important role in between the income of the poor and the rich so that suppressing the number of criminals which the poor will seek to achieve their expectation investigate crime rates based on level of education, through criminal acts. number of police and population where only education variables affect the crime rate [16]. D. Income Population Density, Open Unemployment Rate, Variable wage rates have a negative and Average Length of School and GDP Per Capita significant impact on the level of criminality in significantly influence crime rate, while poverty level Indonesia. When the salary earned too small, it will variable not affect crime level in North Sumatera cause high crime rate in the /City [11]. The 2009-2013 [17]. minimum wage has a negative relationship to violent crime, property crime and total crime. The lower FIGURE 1. Conceptual Frameworks income will have an impact on the increase in Percentage of people violence and crime [12]. who did not finish Income is a determinant factor of welfare for elementary school most people. Where a person is prosperous if he has high income, otherwise it belongs to poor Gini Ratio categorized. On the other hand, high income also invites criminality due to the desire to earn more Criminal acts income than he usually gets. Income per capita

E. Unemployment Unemployment is someone who has joined in the labor force, who are actively looking for work at Unemployment rates a certain wage level, but can’t get the desired job [13]. Under the above opinion, unemployment are people whose age is in the labor force age and are G. Hypothesis looking for work [14]. High unemployment rates will a. Percentage of people who did not finish increase the crimes [3]. elementary school has a positive and Unemployment is directly related to the significant influence to the criminal acts. productivity of a person through it a person will get a b. Gini Ratio has a positive and significant payoff in the form of salary which will be utilized to influence to the criminal acts. meet various needs of his life. If the people is an c. Income Per Capita has a negative and unemploy it must have a low level of productivity, so significant influence on the criminal acts. to fulfil his needs he will have a difficulty. This d. Unemployment Rate has a positive and condition will encourage someone to cover low significant influence to the criminal acts. productivity levels through various means such as crime. III. RESEARCH METHODS

F. Conceptual Framework A. The Scope of Research Criminality is any actions or acts that harm both This research is an associative research and used economically and psychologically in violation of the secondary data. The variables are Criminal acts as laws prevailing in Indonesia as well as social and

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Dependent Variable, while Percentage of people who did not finish elementary school, Gini Ratio, Income IV. RESULT AND DISCUSSION Per Capita, and Unemployment Rate as Independent Variables. The research areas are all regencies/cities A. Results in North Sumatera which amount to 33 The Hausmann test results are as follows : regencies/cities from 2013 to 2015. TABLE 1. Hausmann Test B. Technique of Analysis Chi-Sq. Chi- Test Summary Prob. Data processing techniques using panel data Statistic Sq. d.f. regression. Where the processed data is a Cross-section 16,299729 4 0,0026 combination of cross-sections and time series- random observations, which are obtained and researched in line with the passage of time. This panel data method Based on the Hausmann test results, the best has space and time dimension, so the estimation of model is fixed effect model (FEM) because the variables and calculation results will provide wider probability value of Hausmann test 0,0026 which is empirical analysis. smaller than alpha value 0,05. The result of panel data regression using fixed C. The Fixed Effect Model effect model is : FEM is similar to a regression which uses Dummy Variable as independent variable so that can TABLE 2. Panel Data Regression Fixed Effect be estimated with Ordinary Least Square (OLS). Model (FEM) With this estimate, an unbiased and consistent Variable Coefficient Std. Error t-Statistic Prob. estimators will be generated. In fixed effect methods, C 1375,401 151,4214 9,083267 0,0000 individual and time characteristic differences are accommodated on the intercept so that the intercept People_notfinish 4,330238 21,57635 0,200694 0,8416 changes between data and time. Gini 2011,950 391,6639 5,136931 0,0000 Income_capita -0,030195 0,003970 -7,605098 0,0000 D. The Random Effect Model Unemployment 24,78655 11,36952 2,180088 0,0331 In random effect method differences in data and time characteristic is accommodated on the error of R-squared 0,962374 Mean dependent var 2448,018 the model. Given there are two components that have contributed to the error formation, i.e data and time, Adj. R-squared 0,940527 S.D. dependent var 1934,936 so the random of error in REM also needs to be S.E. of regression 481,7136 Sum squared resid 14386975 parsed into errors for data components, component F-statistic 44,05013 Durbin-Watson stat 2,695683 time errors, and combined errors. Prob(F-statistic) 0,000000

E. Hausman Test In panel data modeling, the test can be used to Based on the regression result, the r squared see the feasibility of using paned models. This test is value is 0.9623 indicating the level of independent performed to determine whether a fixed effect variable (Percentage of people who did not finish method (FEM) or random effect method (REM) elementary school, Gini Ratio, Income per capita and which can be selected. This test is based with the Unemployment Rate) able to explain the dependent following hypothesis: variable (criminal acts) is 96,23% while the rest of 1. FEM is selected if the probability value is 3,77% is the influenced of other variables that are not less than 0,05 present in the research model. 2. REM is selected if the probability value is Simultaneously, based on probability value of more than 0,05 F-test equal to 0.0000 which is smaller than alpha value of 0.05 shows all the independent variables can affect the dependent variable together and significantly. Meanwhile, if viewed partially by comparing the probability value of t-test which is smaller than alpha value 0.05, i.e., Gini ratio, income per capita and unemployment. Whereas percentage of people who did not finish elementary school partially did not significantly affect the criminal acts, due the children who not finishing primary school are still

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underage and under the responsibility of their parents TABLE 3. Cont. so that if they commit an act of criminality, then the police can not take action directly or count as data in 19 Batubara 195,79 crime number. Thus, the effect of percentage of 20 Padang Lawas Utara -695,03 people who did not finish elementary school will affect as time goes to the crime rate in the future. 21 Padang Lawas -541,70 The constant coefficient value of 1375,401 22 Labuhanbatu Selatan 124,53 shows that if all independent variables do not change (the value is constant from the previous period), then 23 Labuhanbatu Utara 2.369,05 the average crime rate for all regencies/cities in North 24 Nias Utara -728,74 Sumatera is 1375 incidents. 25 Nias Barat -800,97 For percentage of people who did not finish elementary school variable with the coefficient value 26 -638,65 of 4.33, indicates that if the variable increase by 1%, 27 -634,02 then criminal acts also increase by four incidents. For 28 -606,41 Gini ratio variable with the coefficient value of 2011,95 indicates that if the variable increase by 0.1, 29 -601,33 then it will cause criminal acts increase by 201 30 Medan 13.015,47 incidents. 31 -700,54 Then for income per capita variable with the coefficient value of -0.03, indicates that if the 32 -933,91 variabel increase by 1 million Rupiah it will cause 33 Gunung Sitoli -816,57 criminal acts decrease as much 30 incidents. While for unemployment rate variable with coefficient The fixed effect coefficient value is used to see value 24.876 indicates that if the unemployment the effect of regression coefficient value of panel data increase as much 1% it will increase the criminal acts for each regency/city. Medan has the largest fixed as many 24 incidents. effect coefficient value which is 13.015,47. It indicates that the change of each variable gives the TABLE 3. Coefficient Value of Fixed Effect for Each most impact or influence on the crime rate in Medan Regency/City city. While the area that has the lowest fixed effect Value of Fixed No Regency/City coefficient is Pakpak Bharat with value -1.295,52. It Effect indicates that the change of each variable gives the 1 Nias -839,40 least impact or influence on the crime rate in Pakpak 2 Mandailing Natal -1.081,91 Bharat Regency. 3 Tapanuli Selatan -168,35 Based on the sign of fixed effect coefficient, there are nine regency/city that are positive value, 4 Tapanuli Tengah -938,47 i.e., Labuhanbatu, Asahan, Deli Serdang, Langkat, 5 Tapanuli Utara -808,64 Serdang Bedagai, Batubara, Labuhanbatu Utara, 6 Toba Samosir -905,79 Labuhanbatu Selatan and Medan. This condition illustrates that changes in the independent variables 7 Labuhanbatu 381,79 have an impact and a direct effect on the crime rate. 8 Asahan 150,06 While the other 24 regencies/cities have the negative 9 Simalungun -479,86 coefficient sign, this condition has a meaning that research variables have a relatively small impact 10 Dairi -975,41 where compared to regions that have positive 11 Karo -523,32 coefficient signs. 12 Deli Serdang 964,75 B. Discussion 13 Langkat 696,62 The effect of Percentage of people who did not 14 Nias Selatan -887,64 finish elementary school on Crime Rate 15 Humbang Hasundutan -799,97 The high participation of the society to go to school will reduce their ability to commit crimes 16 Pakpak Bharat -1.295,52 because their time will be spent mostly for school 17 Samosir -1.106,90 [18]. High education will bring the better and legal job, this condition tends to make someone think 18 Serdang Bedagai 610,99 before doing a crime. Meanwhile, a person who only

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graduates from elementary or junior high school will terms that have a direct impact on reducing regional have no skill and more free time so that they will crime rates. have greater chance to commit crimes. Based on the results of panel data regression The Effect of Unemployment Rate on Crime Rate that the relationship between Percentage of people The impact of unemployment is declining who did not finish elementary school and the crime welfare and increasing the crime rate. When people rate is positive. Therefore, this relationship is in are unemployed then they do not have income or a accordance with the existing theories or studies job, so the needs of themselves and their families are which can be used as the basis for further analysis. not meet, especially for the basic needs. Then to meet Although this variable does not significantly affect to those needs, unemployment will achieve it in an the criminal acts, it can be an early warning for the unlawful manner that violates the law. The crime rate local government to overcome or reduce the positively affects the unemployment rate [3]. percentage of people who did not finish elementary On the results of panel data regression, the school thus reducing criminal acts. Where public relationship of unemployment to the criminal acts is education will increase and contributr to the in accordance with the statement which is related reduction of criminal acts in each region. positively and significantly affect the criminal acts. The problem of unemployment is a quite complicated The Effect of Gini Ratio on Crime Rate issue to solve, but it is not impossible to overcome it. There a strong relationship between income gap Government and society must work together to and crime rate through the use of Gini coefficient overcome the problem of unemployment by creating [19]. While assessed the relationship between various jobs that have a real impact on the decline in income gap and crime in a region [20]. Between Gini the unemployment rate which will ultimately reduce Ratio and Crime Rate, there is a strong positive the criminal rate in each region. relationship [21]. Based on the results of panel data regression, V. CONCLUSIONS AND RECOMMENDATIONS the relationship between Gini ratio and the crime rate is positive. This relationship has been is accordance A. Conclusions with the previous statements. With the largest Percentage of people who did not finish coefficient value is compared to other variables and elementary school did not directly affect the criminal significantly affect the crime rate, then this variable is acts. This variable has the smallest coefficient value the main cause of high crime rate in a region. In other compared to other independent variables. words, low income causes the area to tend to have The Gini directly affects the criminal acts. This high crime rate. The economic factors are the main variable has the highest coefficient value compared to couse of a person committing a crime (criminality) to the other independent variables. meet the needs of his life. This condition is an Increased income per capita affects decrease of important signal for government to distribute the the crime. increased unemployment will increase the economic growth are equally and equitable so that it criminal rate can improve the welfare that ultimately reduces the crime rate. B. Recommendations Development equality must keep being done by The Effect of Income per Capita on Crime Rate the government to reduce the criminal acts through The income level is a factor that can affect the poverty alleviation and unemployment so that people crime rate. Wage has a negative and significant can live prosperously and fulfil their needs of life impact on the crime rate in Indonesia [11]. The without disturbing others. minimum wage rate has a negative relationship to the Although education does not significantly affect violence and crime [12]. the criminal acts, through educational approaches. Based on the result of panel data regression that the Government can also reduce the criminal rate through relationship between per capita income and the crime the fulfilment of the need for better education so that rate is negative. This relationship is in accordance it can become a foundation for people to get a better with the previous statements. Although income per life. capita is a major part of the economic factors, the small value coefficient shows that the income per capita does not indicate the actual conditions occurring in the societies. Governments should take sustained action so that people’s incomes rise in real

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